ATLANTA -- A key panel in the West Virginia state Legislature yesterday approved proposed legislation to put back on track a $180 million school bond issue issue derailed this summer by the state's Supreme Court.

The proposal was passed out of the House of Representatives' Finance Committee in the second day of a special session that Gov. Gaston Caperton called last week to deal with the funding problems of the West Virginia School Building Authority.

According to the committee's chairman, Rep. Robert Kiss, D-Prosperity, the bill would earmark about $12 million a year from consumer sales taxes to secure the delayed bond issue.

"Given what has happened in the courts, this seems to be the best alternative we have," Kiss said in an interview. He said the bill would also approve about $4 million in annual sales taxes to fund about $50 million of bond issuance by the West Virginia Regional Jail Authority.

On Sunday, the Senate's Finance Committee approved similar proposed legislation, he said.

Kiss said he expected the full House and Senate to approve their respective versions of the bills and then reconcile what he described as "minor" differences.

The authority had been set to sell about $190 million of new-money debt and $150 million of refunding bonds in June before a lawsuit was filed by two taxpayers in Kanawa Circuit Court contesting its legal right to issue annual-appropriation backed bonds.

The plaintiffs charged that because the school authority backs its debt with appropriations from the West Virginia Legislature, borrowings by the agency are a general obligation of the state and therefore need voter approval.

The state Supreme Court ruled for the plaintiffs in July, banning future new-money sales of such bonds unless voters first approve them or a dedicated revenue source is found.

In a 40-page opinion, written by Associate Justice Thomas Miller, the court rejected the contention that the Legislature had the option of not continuing appropriations on School Building Authority.

But the court said the ruling does not apply retroactively to the #301 million in debt already issued by the authority, or to future refunding bonds.

Clacy Williams, executive director of the authority, said the legislation would permit sale of an issue now calculated at about $180 million.

However, even if the bill becomes law, Williams said, the authority would first bring a test case before the Supreme Court to head off any more legal problems before selling the bonds.

Williams said he hoped the court could quickly hear the test case on an expedited basis. Following a favorable ruling, he said, the bonds would be sold as quickly as possible.

As planned in June, the borrowing had been sized at $338.1 million, comprising about $190 million of new- money bonds and about $150 million of refunding debt.

In announcing the sales tax as a revenue source when he called for the special session last Wednesday, the governor said he had rejected other alternative funding sources such as lottery revenues or turnpike toll collections.

Caperton also said he rejected seeking voter approval for the bonds, because such a process would take too long.

Use of the sales taxes, he said, "is the most efficient and effective way, in light of the Supreme Court decision."

"We must act now to complete the school improvement program we began in 1989," Caperton said, stressing the importance of opening the new schools the state had planned to fund with bond proceeds by 1996.

"Delay means lost time, lost money, lost jobs, and lost opportunities for our students," he said.

Since the school authority was created in 1989, it has sold $331 million of bonds, with the proceeds going to build 26 new schools and renovate 470 others.

State sales tax collections currently bring in about $680 million a year, according to the state revenue department.

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